Homework: chapter 15 HW Score: 0 of 50 pts E15-20 (similar to Save 2 of 6 (O com
ID: 2534629 • Letter: H
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Homework: chapter 15 HW Score: 0 of 50 pts E15-20 (similar to Save 2 of 6 (O complete) Hw Score: 0%, 0 of 190 pts Question Help Concord Partners provides management consulting services to government and corporate clients. Concord has two supportd de ccst records indicate the fol lowing: The two support departments' costs have been allocated to the two operating departments using the direct method and the step-down method (AS department first) and the step-down method (IS department first). The results of the allocations are as follows: services (AS) and information systems (IS and two operating t consulting (GOVT) and corporate consulting (CORP). For the first quarter of 2017, Concord's (Click the icon to view the direct method.) ?(Click the icon to view the cost records.) (Click the icon to view the step-down method (AS first).) Read the requirements ? (click the icon to view the step-down method (IS first).) (Click the icon to view a summary of Requirement 1a. Allocate the two support departments' costs to the two operating departments using the reciprocal method. First, determine the linear equatons for each support department. Requirements AS- 1. Alocate the two support departments' costs to the two operating departments using the reciprocal method. Use (a) linear equation and (b) repeated 2. Compare and explain differences in requirement 1 with those of the direct method and the step down method. Which method do you prefer? Why? PrintDone Choose from any drop-down list and then click Check Answer. Clear All Check AnswerExplanation / Answer
1)Reciprocal Method
Linear Equations Method
a.AS = $600,000 + 10% (IS)
b.IS = $6,000,000 + 20% (AS)
c.GC = $8,750,000 + 48% (AS) + 27% (IS)
d.CC = $12,450,000 + 32% (AS) + 63% (IS)
Solve equation "a" and "b" simultaneously.
a.AS = $600,000 + 10% (IS)
b.IS = $6,000,000 + 20% (AS)
a.AS = $600,000 + .10($6,000,000 + .20 AS)
AS = $600,000 + $600,000 + .020 AS
AS = $1,200,000 + .020 AS
.980 AS = $1,200,000
AS = $1,200,000/.980 =$1,224,489.80
b.IS = $6,000,000 + 20% (AS)
IS = $6,000,000 + 20% ($1,224,489.80)
IS = $6,000,000 + $244,897.96
IS = $6,244,897.96
Solve equation "c" and "d" using solutions from "a" and "b".
c.GC = $8,750,000 + 48% (AS) + 27% (IS)
GC = $8,750,000 + .48($1,224,489.80) + .27($6,244,897.96)
GC = $8,750,000 + $597,355.10 + $1,686,122.45
GC = $8,750,000 + $2,283,477.55
GC = $11,023,877.55
d. CC = $12,450,000 + 32% (AS) + 63% (IS)
CC = $12,450,000 + 32% ($1,224,489.80) + 63% ($6,244,897.96)
CC = $16,776,122.45
Check: GC=$11,023,877.55
CC = $16,776,122.45
Total:$27,800,000
Repeated Iterations
Comparison
All allocation methods account for all of the $27,800,000
The Linear Equation, Repeated Iterations are theoretically correct and preferable th the direct and step methods.
The direct method ignores services that support departments provide to other support departments.
The step method results depend on the order of implementation.
AS IS GOVT CORP TOTAL Original costs $600,000 $6,000,000 $8,750,000 $12,450,000 $27,800,000 Allocate AS (.20,.48,.32) (600,000) 120,000 288,000 192,000 0 Sub-total $0 $6,120,000 $9,038,000 $12,642,000 $27,800,000 Allocate IS (.10,.27,.63) 612,000 (6,120,000) 1,652,400 3,855,600 0 Sub-total $612,000 $0 $10,690,400 $16,497,600 $27,800,000 Allocate AS (.20,.48,.32) (612,000) 122,400 293,760 195,840 0 Sub-total $0 $122,400 $10,984,160 $16,693,440 $27,800,000 Allocate IS (.10,.27,.63) 12,240 (122,400) 33,048 77,112 0 Sub-total $12,240 $0 $11,017,208 $16,770,552 $27,800,000 Allocate AS (.20,.48,.32) (12,240) 2,448 5,875 3,917 0 Sub-total $0 $2,448 $11,023,083 $16,774,469 $27,800,000 Allocate IS (.10,.27,.63) 245 (2,448) 661 1,542 0 Sub-total $245 $0 $11,023,744 $16,776,011 $27,800,000 Allocate AS (.20,.48,.32) (245) 49 118 78 0 Sub-total $0 $49 $11,023,862 $16,776,089 $27,800,000 Allocate IS (.10,.27,.63) 5 (49) 13 31 0 Sub-total $5 $0 $11,023,875 $16,776,120 $27,800,000 Allocate AS (.20,.48,.32) (5) 1 2 2 0 Sub-total $0 $1 $11,023,877 $16,776,122 $27,800,000 Allocate IS (.10,.27,.63) 0 (1) 0 1 0 Post-allocation Balance $0 $0 $11,023,877 $16,776,122 $27,800,000Related Questions
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